CAPM®/PMP® EXAM PREP COURSE
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Project Management Excellence Series by Project Focus™
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CAPM®/PMP® EXAM PREP COURSE
Seventh Encounter™
(Book VII – Minding Uncertainty)
Mike Awuah, PMP
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Project Management Excellence Series by Project Focus™
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Copyright © Mike Awuah, March, 2009
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Rights: All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system in any form or by any means
– electronic, mechanical, photocopy, recording, or any other –
except for brief quotations in printed reviews, without the prior
written permission of the publisher.
ISBN:
Printed in Ghana: by DigiBooks Ltd.
Published: by Project Focus™ Ltd.
Tel.: 233 28 8229494, 233 28 8229696, 233 28 8229898
Web Address: www.projectfocus.com
Email: mike.awuah@projectfocus.com
CAPM®, PMI-SP®, PMI-RP®, PMP® and PMBOK® Guide are all
registered marks of Project Management Institute, Inc.
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Cover Design: Fred Labi
Image of Giraffe: Courtesy of Positive Net
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Author
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Mike Awuah, PMP
Reviewers and Contributors
Opuni Frimpong-Manso, PMP
Franklin Eleblu, PMP
Efua Agbossey-Dimado
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Project Management Excellence Series by Project Focus™
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Seventh Encounter
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Introduction
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This is the seventh in a series of sixteen
episodes. The series is designed to explain
the technical language of the PMBOK®
Guide. It does so in a way that you can
easily understand. It explains project
management concepts through simple
discourses and narratives.
Before you read this Seventh Encounter,
read the following portion of the PMBOK®
Guide:
 Chapter 11, pages 395-458
As you will find, there is a summary of the
key technical terms at the end of the story.
Please read and ensure that you understand
them.
You
may
reinforce
your
understanding from the glossary of the
PMBOK® Guide, pages 720-721.
Seventh Encounter describes how to hedge
the project’s fortunes: how to anticipate
and plan for risk, design responses and
assign response roles and responsibilities.
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Project Management Excellence Series by Project Focus™
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Seventh Encounter
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The Story
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During Kofi’s attempt to build the failed
Kofi Family House, many things went
wrong. On Friday night he mused over
the difficulties he faced and concluded
that he could have contained them if he
knew how.
He went to Korsa and enquired how to
anticipate and control events that may
adversely affect a project as it is
delivered. Korsa, in his response, said
“unanticipated events may also bring
good fortunes to a project”. He further
explained that it takes a definite
continuous process during the life cycle:
 plan to plan
 identify and document
 prioritise
 analyse
 plan to respond
Korsa said “it is simple; on every project,
work to minimise threats and maximise
opportunities”.
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The Seventh Encounter – Risk Planning
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Kofi woke up suddenly in the middle of
the night and could not sleep anymore!
Hard as he tried, he simply could not fall
asleep again. When he looked at the time,
it was 2:30am.
Though he could not sleep, he felt that his
body had not had enough rest. He
therefore remained on the bed, beside
Yaba, and engaged himself in serious
thought on why his building project
failed. In his musings, he asked himself
many questions, including:
 “Why did I fail?”
 “What did I do wrong?”
 “Was the economy the cause?”
 “Did my neighbours wish me
evil?”
 “Should I have used a contractor?”
 “What could the timing have
contributed?”
 “Why couldn’t I anticipate all the
misfortunes?”
 “Could I have done things
differently?”
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To each question, he considered many
possible answers. In the end he was very
confused. He blamed himself; he blamed
everybody; he blamed nature!
As early as 5:00am on Saturday morning
he was ready for the Korsas. When he got
there, he was surprised to find Korsa
already awake and feeding Akoo Kofi, the
parrot.
Korsa was equally surprised “is there a
problem?” he asked. Kofi’s response was
“I have been wondering how I failed the
way I did when I attempted to build a
house of my own”. He continued “I think
nature, fortune and providence have been
unkind to me”. Korsa said “wrong my
friend!” “What then was it?” Kofi asked.
After the two men had comfortably taken
seats in his study Korsa said “let me tell
you a short story”. He started:
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“It was a fine Thursday morning during
the wet season in the month of June. The
rains had been particularly heavy that
week. It was during the time I was
supervising the Kaku House building
project. I either had to go or send
someone to Kokote, 3km away from the
project site to do some work. We
normally did the trip by walking”.
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“On that Thursday morning, the
Meteorological Services Department had
announced that ‘there is a seventy percent
chance of a thunderstorm and a
downpour today’. If it should rain, the
person doing the journey will get wet.
Rain and wetness could reduce worker
efficiency and delay work subsequently.
It could also affect the transport of
materials needed for work. On previous
rainy days, the project and the project
team had suffered adversely because of
such uncertainties”. “If the prediction
came true, the project would suffer
consequently we considered many options
as we brainstorm our response. We
discussed the following seven:”
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“In the first option, I would go myself. I
did not consider the rain any problem. I
also thought that the likelihood of rain
was low since two earlier predictions by
the same government entity did not occur.
I therefore decided that I would take
action only if it rained and those actions
would depend on the consequences of the
rain during the trip. On several occasions,
team members had to travel in spite of
bad weather conditions to the project site.
We did most of these travels, as usual, by
walking”. Kofi interjected and asked “and
what happened?” Korsa said “wait I have
not finished narrating the story”. He
continued:
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“In the second option we proposed that
Kofi Jnr. should go; he would wear a
raincoat. He considered the raincoat good
enough to protect him should rain fall as
predicted. He did not think that the
downpour will inundate the road”.
“In option three, Yaa was to go wearing a
raincoat and carrying an umbrella.
Additionally she would carry the supplies
she needed in a polythene bag. When a
team member asked her about the extra
burden of the umbrella she replied ‘just in
case’”.
“In option four, we would give the
responsibility to a contractor. We would
allow the person to handle the
information and also be responsible for
the safe delivery of the items. We would
empower the person to be effective. We
considered paying him a wage and giving
him enough additional resources to act in
case of any eventuality”.
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“In another option, we considered the
possibility of postponing the trip
altogether. In the past, rainstorms made
portions of the road impassable and also
delayed work. Since postponing would
delay the project, we planned to employ
more resources on subsequent project
activities to make up for the time that
would be lost”.
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“Afiba, Kaku’s first daughter likes
driving. She offered to help. She would
use the project four-wheel drive vehicle.
It needed to be washed. She did not have
enough time to wait for the car to be
washed as she had to run many errands in
the day. Afiba reasoned that if it rained,
the rain water would wash the car. She
timed her travel to coincide with the onset
of the rain so that the vehicle could get a
good wash. The use of the vehicle was
particularly welcome as the space in it
could be used to transport supplies for
which a pick-up had been hired for the
next day. Transporting the items would
save the project GHC300.00”.
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“There were several helpers. Kobby is
Kaku’s nephew. He was about Kofi
junior’s age and was home on a long
vacation. He offered help. That boy is
conscious of his health, you know. He
could not observe his fitness schedule
properly that morning because he had
difficulty with the treadmill. He found an
opportunity in the difficulty; and offered
to run to the place. He would thus have
killed two birds with one stone.
Additionally, he planned to take along a
raincoat and an umbrella, though he felt
he could reach the place before the rain
started”.
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“As we discussed the options available to
us and began assessing each of them,
Akesi, Kaku’s younger daughter,
reminded us that since work that day
depended on collaboration with the
architect, it made sense to go to the site
only if the expert was going to be there. It
thus became clear to us that whatever
option that was eventually to be
implemented would depend on the
architect. At that point, I took my mobile
telephone and dialed her number. The
telephone network responded ‘the
subscriber you have called is out of
coverage area’. We postponed work for
that day!”
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“What is the significance of this story?”
Kofi asked. Korsa responded “It illustrates
one of the things every project manager
must pay attention to; and that is project
RISK [C1]”.
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Seventh Encounter
“Project risk is an uncertain event or
condition, which has an effect – positive
or negative – on the project if it occurs”
He continued “a risk may have one or more
CAUSES [C2], and if it occurs, may have
one or more IMPACTS [C3]. Impacts
could lead to project failure or substandard
delivery”.
“So what causes risk and what is risk
impact?” Kofi asked. “Causes of risk are
many. A cause may be a requirement, an
assumption, a constraint or condition that
creates the possibility of desirable or
undesirable outcomes”. Korsa went on to
say “on this day, as I have narrated, the
Kaku house project was confronted with
risk; the risk of delay and therefore loss”.
Kofi jumped in and said “what you have
said has taught me a lesson and it is that:
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“Project plans are always future oriented;
and because our bases are usually
assumptions, constraints and requirements,
plans are risk prone”. Korsa responded:
“That is true! Uncertainty is present in all
projects. Wherever and whenever there is
uncertainty, there is risk. Risk is present in
all projects!!” He continued:
“Every project risk is always in the
future; all risks are future oriented”.
“If an anticipated risk occurs, it is no longer
a risk; it is an ISSUE [C4]”. “An issue?”
Kofi asked. Korsa’s reply was:
“An issue is a matter or problem that has
occurred, is not settled or resolved and is
receiving attention for resolution”.
Korsa continued with his train of thought.
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“The impact of a risk event is the
consequence. A consequence may be
beneficial in which case the risk is called
an OPPORTUNITY [C5]. If the impact is
expected to be negative, the risk is called
a threat”.
“If risk is present in all projects, what
should a project manager do then?” Kofi
asked. Korsa said “I will always proceed as
the team on the Kaku House Project did”.
“Tell me what you did” demanded Kofi.
Korsa explained how to prepare and plan
for actions that optimise opportunities and
minimise threats. He said:
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“Early in the project we met to determine
how we would handle risk. In that meeting,
we did many things including:”
 “generating
a
high-level
risk
management plan”
 “setting aside an amount of money
and resources for managing risk”
 “taking a decision on how risk
contingencies would be processed”
 “revising key STAKEHOLDER
RISK TOLERANCES [C6] as they
related to the project, as necessary”
 “taking a decision on which templates
to create and establishing guidelines
for tailoring existing ones”.
“During the meeting, we documented all the
decisions we had taken, into a guiding
document or framework. With the
framework, we proceeded to identify,
prioritise and analyse risks on the project.
Let me explain these concepts one at a
time:”
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“We identified and documented the
characteristics of all possible risks that we
could think about”. “How did you do that?”
“A select group of stakeholders, including
myself, did it” “Why not all of you?” asked
Kofi. Korsa responded “though not
everybody on the project team participated
in this case, during the project life cycle, we
encouraged the team members to stay
involved in the process, by identifying and
suggesting possible risks”.
“When you involve team members, they
develop and maintain a sense of
ownership and responsibility for risks
and their management”
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“Where did you look for risks?” Kofi asked.
Korsa mentioned several places the team
searched for risks on the Kaku House
project. He mentioned among others:
 the design and the project plan
 all the key stakeholders including the
family members
 all the work that was to be done and
the features and functions of the
completed house
 estimates for materials, time and cost
 all documents associated with the
project
 project linkages and relationships.
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“We reviewed all of these and other
documents and gathered information using
all the techniques we knew. We also
analysed our checklists, assumptions,
constraints and requirements. Again, we
employed techniques of diagramming.
Finally we engaged experts in SWOT
analysis”. “Sorry if I ask dumb questions at
times; but what the hell is SWOT?” asked
Kofi. Korsa responded “SWOT is an
acronym of the words:
 Strengths
 Weaknesses
 Opportunities
 Treats.
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“What is that?” asked Kofi. “It is a
systematic review of your strengths and
weaknesses. Usually, your strengths will
point you to external opportunities while
your weaknesses forebear external threats”
answered Korsa. “This effort leads the team
to identify a list of potential risks and their
potential responses” he concluded.
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“So, after identifying your risks and
documenting them and deciding on possible
responses, what did you do?” Kofi
enquired. Korsa replied “we assessed each
risk using the expected impact and the
likelihood that it would occur, to prioritise
or RANK [C7] it”.
“The rank of a risk is also sometimes
referred to as its severity. It is the product
of its probability of occurrence and the
impact, if it should occur”.
“Why did you rank the risks?” Kofi asked.
Korsa replied:
“If we know the rank of a risk together
with its time criticality or urgency, then
we can prioritise our response actions”.
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Risk Severity
Severity = Probability x Impact
PMBOK P291-292
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Figure 1: Defining Risk Severity
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“We could, out of gut feelings, experience
or expertise; tell straight away how to deal
with most of the risks we prioritised this
way”. “What about the ones you were not
sure of?” Korsa said, “we did further
analysis in which we evaluated their
impacts on the overall project and specific
project requirements such as time and cost.”
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“How did you plan to respond to the risks
you identified on the project?” Kofi asked.
Korsa said we used time tested methods.
For each agreed-to and funded risk
response, we assigned someone the
responsibility of executing it if it occurred.
We call such persons RISK OWNERS
[C8]”.
“A risk owner or risk response owner is the
person assigned the responsibility for a
particular agreed-to and funded risk
response” was Korsa’s response. Kofi asked
further “what possible responses could one
employ on a project?” Korsa said “let me
tell you some of the possible responses
using the Wet Thursday story of the Kaku
House project”.
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“Each of the options illustrates one possible
response STRATEGY [C9]”. “Strategy?”
asked Kofi. Korsa responded:
“A risk response strategy is how you
agree to respond to a potential risk
event”.
“How many strategies exist?” Kofi asked.
Korsa replied “we do not have a specific
number of strategies; instead we have
classes of strategies. They include:
 “strategies for opportunities”
 “strategies for threats”
 “Contingent strategies”
“Give me examples” Kofi implored. Korsa
said “let me continue with the Wet
Thursday analogy”:
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“If you remember, my attitude to the rain
was ‘so be it; if it happens I will deal with
it’”. “What strategy is that?” Kofi asked.
Korsa said “it is called ACCEPT [C10],
which means we resigned ourselves to the
potential risk. We did not do anything but
agreed to deal with it if it occurred”. Kofi
said “let me recap” and continued:
“As was the case for the rain, you adopt the
ACCEPT strategy when you think the risk:
 “may, be of low impact”
 “cannot be eliminated”
 “is less probable to happen”.
Korsa added “you are right. Again, accept
may be ACTIVE [11] or PASSIVE [12]. In
passive acceptance you do nothing, during
planning, except to note the potential risk;
in active acceptance you set aside some
money and resources called contingencies
to deal with it, if it should happen”.
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Kofi said “I understand your attitude. Kofi
Jnr. took an umbrella after deciding to walk.
What was that?” Korsa responded “that
strategy is called MITIGATE [13]”.
“Mitigate?” asked Kofi. Korsa responded:
“Mitigate means to reduce the impact or
probability or both attributes of a risk. In
this case Kofi Jnr. planned to reduce the
impact of the rain with the umbrella”.
Kofi asked “do I take it that we plan to
mitigate the impact of negative risks? Korsa
said “yes, you have got it right! Sometimes
we have no choice but to adopt this
strategy”.
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“So then, how different was Yaa’s approach
from Kofi Jnr.’s?” Kofi asked. “Yaa had a
backup plan. The umbrella was to help in
case the raincoat failed. This is good
practice; having a backup plan is always a
good thing to do. Normally when a primary
response proves inadequate, you implement
a backup or FALLBACK PLAN [14]” said
Korsa. Korsa explained:
“A fallback plan is a prepared response
to a risk that has occurred and the
primary response proves to be
inadequate”.
Korsa asked afterwards “do you remember
what our fourth option was?”
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Kofi responded “you would give the
responsibility for the day to a contractor.
You said you would pay him and therefore
he would assume the risk and the
responsibility to respond to it if it
occurred”. Korsa said “you have a
remarkable memory! That strategy is called
TRANSFER [15]” “Transfer?” asked Kofi.
Korsa said:
“Transfer involves shifting part or all of the
negative impact of a risk, along with the
response responsibility, to a third party. A
good example is buying insurance”.
“Is that why we generally buy insurance
policies?” Kofi asked. Korsa said “Yes!!!!”
Kofi went on and asked “if you could buy
insurance, why did you consider postponing
the trip, an option?”
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Korsa said “we postpone actions or change
a plan to AVOID [16] the negative impacts
of a risk”. “Avoid?”
“Avoiding risk means changing the
project management plan to eliminate the
threat entirely”.
He continued “if you remember our fifth
option, we also considered doing things to
make up for lost time if we postponed the
trip. This was meant to catch up; it is good
practice”. Kofi observed that all the
strategies seemed to be focused on threats
and wondered whether there were no
opportunity-related strategies.
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Korsa indicated that there are indeed
strategies for opportunities. He said
“Afiba’s approach was interesting. Let us
recount it:
 “she would drive there herself”
 “she would time her travel to
coincide with the rain”
 “she would get a free rain car wash”
 “she would transport items to save
cost”.
.
.
.
Seventh Encounter
“You see, she saw opportunities the rest
could not see”. “What? How?” Kofi asked.
Korsa said “she EXPLOITED [17] the
opportunity”. “Exploit?” Kofi asked. Korsa
explained:
“Exploit means ensuring that an opportunity
is identified and taken advantage of. Afiba
would use the rain to wash the car and save
GHC300.00 by transporting items with it”
“Usually we exploit opportunities by
eliminating the uncertainties associated with
a particular upside risk”. Kofi said “smart
Afiba!”
pf
pf
pf
pf
pf
pf
pf
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. . .
pf
.
.
.
Korsa added “she was indeed smart!” He
continued “she did not only exploit the
opportunity, she also ENHANCED [18] it”
“Enhance?” Kofi asked. Korsa responded:
“To enhance, means to increase the
probability and or positive impacts of an
opportunity”.
“Afiba would have enhanced the
opportunity by the timing she chose.
Making the travel coincide with the rain
would have made the wash a certainty!”
pf
pf
pf
pf
pf
pf
pf
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. . .
pf
.
.
.
Kofi said “I guess Kobby also exploited the
situation”. Korsa responded “you are right;
he saw an opportunity to exercise, right
there, in the midst of the problem”. Kofi
wondered
“I
suppose
identifying
opportunities is in itself a skill”. Korsa
responded “you couldn’t have said it better;
that explains why in managing risks on a
project, expert judgment is indispensable!”
“In managing risks on any project, you
must optimise your options; that means
always work to increase opportunities
and decrease threats”.
Kofi exclaimed “I now understand; I
ignored or missed all the opportunities and
did not identify threats, let alone minimising
them. Now I know one thing for sure:”
“Minding risks on any project enhances
its prospects of success!”
pf
pf
pf
pf
pf
pf
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. . .
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.
.
.
“There is more” said Korsa. “Sometimes
risks can be SHARED [19]”.
“Sharing an opportunity involves
allocating some or all of the ownership of
the risk to a third party who is best
placed to capture the benefits for the
project”.
“Give me an example” Kofi asked. Korsa
said “Instead of throwing away the byproduct of a process, you may ask someone
to use it for something else and then the two
of you could share the proceeds”. “I
understand” said Kofi. He continued “so did
Akesi help the team by reminding everyone
of the need for the architect?” Korsa
responded:
pf
pf
pf
pf
pf
pf
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. . .
pf
.
.
.
“What Akesi did was classic! She clearly
showed the team that any strategy that was
to be implemented would have been a
CONTINGENT [20] one” “Contingent?”
asked Kofi.
“A contingent strategy is one that is
designed for use only under certain
conditions”.
“Akesi reminded everybody that they could
scheme all they liked; but until the architect
was present, there would be no
performance. There was no show!”
pf
pf
pf
pf
pf
pf
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. . .
pf
.
.
.
At this point Kofi’s mobile handset beeped
twice. He interrupted Korsa and said “I
have just received a text message from
Yaba, my wife, asking me to come home in
one hour. Before I leave, I want to list four
things I have learnt today. They are project
risk planning concepts, project risk
planning processes and summary of risk
response strategies. I will also recount
what I understand to be the structure of a
risk statement and how to analyse
assumptions and constraints”.
Korsa lit his pipe
closed his eyes
smoke
from
intermittently. He
said “go ahead!”
pf
pf
pf
pf
pf
and started smoking. He
and continued puffing
the
Victorian
tool
reclined in his seat and
pf
pf
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. . .
pf
List I – Project Risk Planning Concepts
.
.
.
Concept I – Risk
Risk is an uncertain event or condition,
which if it happens will affect project
objectives either positively or negatively.
Concept II – Risk Cause
A risk cause may be a requirement, an
assumption, a constraint or condition that
creates the possibility of desirable or
undesirable outcomes for a project.
Concept III – Risk Impact
The impact of a risk event is its effect or
consequence on the project or the project
objective. Impacts may be positive
(beneficial) or negative (harmful).
Concept IV – Issue
An issue is a matter or problem that has
occurred, is not settled or resolved and is
receiving attention for resolution. For
proper management, issues are documented
in Issue Logs.
pf
pf
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Concept V – Opportunity
An opportunity is a risk expected to have a
positive impact on a project if it happened.
On any project the project team should seek
to maximise opportunities.
.
.
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Seventh Encounter
Concept VI – Stakeholder Risk Tolerance
A stakeholder’s risk tolerance is that
person’s willingness to accept or withstand
risk and risky situations. It is an EEF. Other
stakeholder and risk related EEFs are:
 risk attitudes
 stakeholder biases
 perceptions and attitudes
 organisational tendencies
 organisational risk tolerance
 industry risk study information
 commercial risk databases
Concept VII – Risk Rank
The rank of a risk event is its severity.
Severity is determined as the product of the
probability of occurrence and the impact.
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. . .
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The rank is called expected monetary value
if the impact is denoted in monetary terms
and expected time if the impact is measured
in terms of time.
.
.
.
Concept VIII – Risk Owner
A risk owner or risk response owner is the
person assigned the responsibility for a
particular agreed-to and funded risk
response.
Concept IX – Risk Response Strategy
A risk response strategy is how the planning
team agrees to respond to a potential risk
event.
There are response strategies for both
positive and negative risks. Generic
response strategies for threats include:
 Avoid
 Mitigate
 Transfer
Generic
response
opportunities include:
pf
pf
pf
pf
pf
strategies
for
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 Exploit
 Enhance
 Share.
.
.
.
Concept X – Accept
Accept is a strategy for both positive and
negative risks.
As a strategy for threats it means deciding
not to change a project management plan to
deal with a risk. This would usually be
because it is seldom possible to eliminate all
threats from a project.
As a strategy for opportunities, it means the
willingness to take advantage of a risk if it
comes, but not actively pursuing it.
Concept XI – Active Acceptance
In active acceptance the project team sets
aside resources, money and time to deal
with anticipated threats or opportunities.
Concept XII – Passive Acceptance
pf
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In passive acceptance, though the planning
team could anticipate a risk event, it decides
to do nothing but only document the risk
and the accept strategy, leaving the project
team to deal with risks as they occur.
.
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Seventh Encounter
Concept XIII – Mitigate
Mitigate means to reduce the severity of a
risk event by reducing its impact or
probability or both.
Concept XIV – Fallback Plan
A fallback plan is a risk response plan
implemented only when the primary
response proves inadequate.
Concept XV – Transfer
Transfer is a risk response strategy in which
some or all of the negative impacts of a
threat, along with ownership of the
response, is shifted to a third party.
Concept XVI – Avoid
Avoid is a risk response strategy that entails
changing the project management plan to
avoid the threat entirely.
pf
pf
pf
pf
pf
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Concept XVII – Exploit
Exploit is a positive risk response strategy.
It seeks to eliminate the uncertainty
associated with an opportunity by making
sure that the event definitely happens.
.
.
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Seventh Encounter
Concept XVIII – Enhance
Enhance is a positive risk response strategy.
It is used to increase the severity of an
opportunity by increasing the probability or
impact or both.
Concept XIX – Share
Share is a positive risk response strategy. It
involves allocating some or all of the
ownership and the response responsibility
of the opportunities of an event to a third
party better placed to manage them for
mutual benefit.
Concept XX – Contingent Response
A contingent risk response strategy is one
that is designed for use only if certain events
occur.
pf
pf
pf
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.
[This page intentionally left blank]
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. . .
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List II – Project Risk Planning Processes
.
.
.
The PMBOK® Guide recommends five
processes for dealing with uncertainty on a
project. They are:
 Plan Risk Management
 Identify Risks
 Perform Qualitative Risk Analysis
 Perform Quantitative Risk Analysis
 Plan Risk Responses
No matter how simple, complex or the
industry of a project, we recommend that
project planners address all the processes
for risk on every project.
On small projects, we can simultaneously
carry out all the processes, but on large,
very complex projects, we recommend the
sequence we show on the opposite page.
We define the five processes on the next
twelve pages.
pf
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.
.
.
Planning Risk
Perform
Qualitative
Risk
Analysis
Identify
Risks
Plan Risk
Management
experience
expertise
Plan Risk
Responses
experience
Perform
Quantitative
Risk
Analysis
PMBOK P273-307
pf
Figure 2: Risk Planning Sequence of Processes
pf
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Scope of Risk Management
.
.
.
The diagram on the right shows when and
how risk management processes are
executed on a project:
 Planning starts early, at project
conception
 Risk identification is continuous
throughout the project cycle
 Risk prioritisation is done throughout
the project cycle
 Risk analysis is done throughout the
project cycle
 Risk response planning does not stop
until the project is closed
In fact, every aspect of risk management is
iterative throughout the project cycle.
pf
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.
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Risk Management Scope
Starting
Planning
Doing
Closing
PMBOK P273
pf
Figure 3: Scope of Risk Management
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. . .
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.
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. . .
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List III – Risk Response Strategies
.
.
.
The severity of a risk event is the product of
its probability and impact. In responding to
risk we pay attention to either increasing or
decreasing the severity. The focus of each
response action therefore is processing the
probability or impact or both of them.
Different combinations of which attributes
we focus on and how we process them
define different strategies.
The different strategies form opposite pairs,
in terms of how we process the probability
and impact. See the diagrams on the next
page. The opposite pairs are:
1. Transfer
2. Avoid
3. Mitigate
pf
pf
pf
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pf
-
Share
Exploit
Enhance
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pf
.
.
.
Summary of Response Strategies
Action
Transfer
 risk and
 management responsibility
Decrease/Increase
 probability of occurrence
Decrease/Increase
 impact or
 probability or
 impact and probability
Negative
Positive
Transfer
Share
Avoid
Exploit
Mitigate
Enhance
PMBOK P303-305
pf
Figure 4: Risk Response Strategies
Response Actions
Strategy:
Nature
Probability

Avoid
-
Reduce to zero
-

Transfer
-
Give away
Give away

Mitigate
-
Reduce
Reduce

Exploit
+
Increase to one
-

Share
+
Give away
Give away

Enhance
+
Increase
Increase
Impact
PMBOK P129-160
pf
29
Figure 5: Risk Response Actions
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. . .
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Representing a Risk Statement
.
.
.
In the risk register, each identified risk must
be described in as much detail so that it is
unambiguous. Write every statement in
such a way that it:
 is actionable
 has one condition
 has one consequence or impact.
This simple structure or format (shown on
the opposite page) must characterise every
statement:
1. If EVENT then IMPACT
or
2. If CAUSE then EVENT and IMPACT
The diagram on the opposite page is a
representation of the first format above. In
the second format, risk causes or triggers
are also identified. A risk statement format
is an OPA.
pf
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. . .
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.
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Structure of a Risk Statement - I
IF
Event or
Condition
There is the
LIKELIHOOD that,
IMPACT
Will
Occur
•
Must be based on reality
•
Must be a FACT or perceived to be FACT
•
Can have NO uncertainty attached
P288
Each statement must be ACTIONABLE.
Each statement must have ONE CONDITION.
Each statement must have ONE CONSEQUENCE.
pf
Figure 6: Writing a Risk Statement – Format I
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. . .
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Alternative Risk Statement Format
.
.
.
An alternative way of writing a risk
statement is to include the cause of the risk
to the format shown on the previous page.
The resulting format is shown on the
opposite page.
It is of the form:
If CAUSE then EVENT and IMPACT
Common risk causes include:
 Incompleteness, inaccuracy,
inconsistency and instability of
assumptions
 Incomplete identification, relaxation
or removal of constraints
 Unclear and incomplete
requirements
 Unexpressed stakeholder
expectations
 Technology inappropriateness
 Enterprise Environmental factors
such as policy, financial and resource
constraints
pf
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. . .
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.
.
.
Structure of a Risk Statement - II
IF
THEN
CAUSE
Event or
Condition
MAY OCCUR
LEADING TO
IMPACT
Must be based on reality
Must be a FACT or perceived to be FACT
Can have NO uncertainty attached
P288
Each statement must be ACTIONABLE.
Each statement must have ONE condition.
Each statement must have ONE consequence.
pf
Figure 7: Writing a Risk Statement - Format II
pf
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An assumption is anything we take for
granted that it is true without proof.
.
.
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Seventh Encounter
Assumption Analysis
We plan in the present for the future. We
therefore need assumptions to deal with an
uncertain future when there are a number of
possible options.
When some assumptions prove false, they
do not significantly affect a project. For
others, a different outcome could have a
very significant effect on the project.
There is a simple process of testing how
risky assumptions might be and including
them in project risks for treatment. The
following simple structure (shown on
opposite page) is helpful in this regard:
IF assumption is FALSE then IMPACT
Our assumptions are usually optimistic; so
when they prove to be false, they expose the
project to negative risks or threats.
pf
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. . .
pf
.
.
.
Analysing an Assumption
IF
This
assumption
is false
THE PROJECT
WILL SUFFER
CONSEQUENCE
Falsity implies:
• Inconsistency
• Instability
• Incompleteness
• Inaccuracy
Look at every stated assumption.
Analyse one assumption at a time.
Include implicit assumptions.
P288
pf
Figure 8: Assumption Analysis
pf
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A constraint is a restriction on the options
of the project or project team.
.
.
.
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Constraint Analysis
Experience has shown that constraints may
not always be as fixed as they appear to be.
By challenging a constraint it may be
possible to remove or relax it. In such a
case, the project is exposed to an upside
risk. By testing constraints in the format
shown below and on the opposite page, the
project management team may identify
possible opportunities:
IF constraint is RELAXED then IMPACT
When analysing constraints, the project
management team could ask very simple
questions:
 Can this constraint be modified or
relaxed somewhat?
 Can the constraint be removed
entirely?
pf
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. . .
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.
.
.
Analysing a Constraint
IF
This
CONSTRAINT
is RELAXED
THE PROJECT
WILL GAIN
CONSEQUENCE
Look at every STATED constraint.
Analyse one constraint at a time.
Test ASSUMED constraints too.
P288
pf
Figure 9: Constraint Analysis
pf
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Before they parted, Korsa - the teacher asked Kofi to prepare for the next meeting.
He asked him to read the following:
.
.
.
Seventh Encounter
Preparation for Next Encounter
Read:
 Cover to Cover™ – Project
Planning V: Risk
 PMBOK® Guide – Chapter 11,
pages 273-307
Again, Korsa said “in spite of the fact that
our next major discussion will come off a
week from now, I will come over to listen
in, and participate if you like, when you
meet with your family to discuss these
concepts on Tuesday, Wednesday or
Thursday”
“Good luck. I will see you again”.
pf
pf
pf
pf
pf
pf
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Seventh Encounter
. . .
pf
Meet Mike Awuah
.
.
.
Mike Awuah is an electrical
engineer. Over the last eighteen
years, he has worked for
several
multinational
companies in different roles on
projects. He has spent his
professional
life
working
mainly for telecommunications companies in several
countries in Africa and Asia. He worked with Ernst and
Young as an IT consultant in the late 1990s.
He taught himself and passed the PMP® credential
examination. He has thereafter, over a short span of over
two years, helped decades of other Ghanaians to
successfully obtain PMI® credentials as course designer
and co-presenter of the training programme delivered by
Project Focus in Accra, Ghana. Project Focus is a project
management consulting and training organisation he
founded.
He is a prolific writer and has published over ten books
on project management. Most of these publications are
designed to help people preparing to take the CAPM®
and PMP® certification examinations of PMI. His most
remarkable contributions to the project management
profession are his two books on professional
responsibility titled Ask the Giraffe and Ask Baby Giraffe.
Mike is married and has five sons.
pf
pf
pf
pf
pf
pf
pf
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